Employee Benefit Plans and Equity Compensation Plan

12 Months Ended

Dec. 31, 2021

Compensation And Retirement Disclosure [Abstract]

Employee Benefit Plans and Equity Compensation Plan

11.  EMPLOYEE BENEFIT PLANS AND EQUITY COMPENSATION PLAN

Pension and Other Postretirement Benefit Plans

SCANA sponsors a noncontributory defined benefit pension plan covering regular, full-time employees hired before January 1, 2014. DESC participates in SCANA's pension plan. SCANA’s policy has been to fund the plan as permitted by applicable federal income tax regulations, as determined by an independent actuary.

The pension plan provides benefits under a cash balance formula for employees hired before January 1, 2000 who elected that option and all eligible employees hired subsequently. Under the cash balance formula, benefits accumulate as a result of compensation credits

and interest credits. Employees hired before January 1, 2000 who elected to remain under the final average pay formula earn benefits based on years of credited service and the employee’s average annual base earnings received during the last three years of employment. Benefits under the cash balance formula continued to accrue through December 31, 2020, after which no benefits accrue except for those participants under the cash balance formula who continue to earn interest credits. Benefits under the final average pay formula will continue to accrue through December 31, 2023, after which date no benefits will be accrued. Once the benefits under SCANA's pension plan no longer accrue, eligible participants will accrue benefits under a cash balance formula within the Dominion Energy Pension Plan, a qualified defined benefit pension plan sponsored by Dominion Energy.

In addition to pension benefits, SCANA provides certain unfunded postretirement health care and life insurance benefits to certain active and retired employees. DESC participates in these programs. Retirees hired before January 1, 2011 share in a portion of their medical care cost, while employees hired subsequently are responsible for the full cost of retiree medical benefits elected by them. The costs of postretirement benefits other than pensions are accrued during the years the employees render the services necessary to be eligible for these benefits.

The same benefit formula applies to all SCANA subsidiaries participating in the parent sponsored plans and, with regard to the pension plan, there are no legally separate asset pools. The postretirement benefit plans are accounted for as multiple employer plans.

Voluntary Retirement Program

In March 2019, Dominion Energy announced a voluntary retirement program to employees, including employees of DESC, that meet certain age and service requirements. In 2019, upon the determinations made concerning the number of employees that elected to participate in the program, DESC recorded a charge of $63 million ($47 million after-tax), of which $51 million was included within other operations and maintenance expense, $3 million within other taxes and $9 million within other income (expense), net. In addition, as a result of the voluntary retirement program, DESC recorded pension plan settlement losses of $16 million within other income (expense), net in 2019.

In the second quarter of 2019, DESC remeasured its pension and other postretirement benefit plans as a result of the voluntary retirement program. The remeasurement resulted in an increase in the pension benefit obligation of $16 million and an increase in the accumulated postretirement benefit obligation of $10 million. In addition, the remeasurement resulted in an increase in the fair value of pension plan assets of $27 million. The impact of the remeasurement on net periodic benefit cost was recognized prospectively from the remeasurement date. The discount rate used for the remeasurement was 4.07% for the pension plan and 4.08% for the other postretirement benefit plan. All other assumptions used for the remeasurement were consistent with the measurement as of December 31, 2018.

In the third quarter of 2019, DESC remeasured a pension plan as a result of a settlement from the voluntary retirement program. The settlement and related remeasurement resulted in an increase in the pension benefit obligation of $25 million and an increase in the fair value of the pension plan assets of $35 million for DESC. The impact of the remeasurement on net periodic benefit cost (credit) was recognized prospectively from the remeasurement date. The discount rate used for the remeasurement was 3.57%. All other assumptions used for the remeasurement were consistent with the measurement as of December 31, 2018.

Changes in Benefit Obligations

The measurement date used to determine pension and other postretirement benefit obligations is December 31. Data related to the changes in the projected benefit obligation for pension benefits and the accumulated benefit obligation for other postretirement benefits are presented below.

	Pension Benefits						Other Postretirement Benefits
(millions)	2021			2020			2021			2020
Benefit obligation, January 1	$	742		$	727		$	184		$	214
Service cost		9			12			1			3
Interest cost		20			24			6			8
Plan participants’ contributions		—			—			—			2
Actuarial (gain) loss		(28	)		41			(8	)		(31	)
Benefits paid		(41	)		(22	)		(12	)		(13	)
Settlements		—			(40	)		—			—
Curtailment		—			—			—			—
Amounts funded to parent		—			—			—			1
Benefit obligation, December 31	$	702		$	742		$	171		$	184

The accumulated benefit obligation for pension benefits for DESC was $697 million at the end of 2021 and $732 million at the end of 2020. The accumulated pension benefit obligation differs from the projected pension benefit obligation above in that it reflects no assumptions about future compensation levels.

Significant assumptions used to determine the above benefit obligations are as follows:

	Pension Benefits						Other Postretirement Benefits
	2021			2020			2021			2020
Annual discount rate used to determine benefit obligation		3.06	%		2.73	%		3.11	%		2.80	%
Assumed annual rate of future salary increases for projected    benefit obligation		3.71	%		4.52	%	N/A			N/A
Crediting interest rate for cash balance plans		1.81	%		1.93	%	N/A			N/A

DESC’s pension benefit obligations include a gain of $29 million in 2021 resulting primarily from an increase in the discount rate and a completed experience study and a $43 million loss in 2020 resulting from a decrease in the discount rate. Actuarial gains recognized during 2021 in DESC’s other postretirement benefit obligations include a $8 million gain resulting from an increase in the discount rate. Actuarial gains recognized during 2020 in Dominion Energy’s other postretirement benefit obligations include a $51 million gain as a result from a completed experience study and other healthcare-related assumption changes and were partially offset by a $19 million loss resulting from a decrease in the discount rate.  

A 6.25% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2021. The rate was assumed to decrease gradually to 5.0% in 2026 and to remain at that level thereafter.

Funded Status

	Pension Benefits				Other Postretirement Benefits
At December 31,	2021		2020		2021			2020
(millions)
Fair value of plan assets	$	768	$	747	$	—		$	—
Benefit obligation		702		742		171			184
Funded status	$	66	$	5	$	(171	)	$	(184	)

Amounts recognized on the consolidated balance sheets were as follows:

	Pension Benefits				Other Postretirement Benefits
At December 31,	2021		2020		2021			2020
(millions)
Noncurrent assets	$	66	$	5	$	—		$	—
Current liability		—		—		(10	)		(11	)
Noncurrent liability		—		—		(161	)		(173	)

Amounts recognized in accumulated other comprehensive loss were as follows:

	Pension Benefits				Other Postretirement Benefits
At December 31,	2021		2020		2021		2020
(millions)
Net actuarial loss	$	1	$	4	$	—	$	—

Amounts recognized in regulatory assets were as follows:

	Pension Benefits				Other Postretirement Benefits
At December 31,	2021		2020		2021			2020
(millions)
Net actuarial (gain) loss	$	70	$	114	$	(5	)	$	1

In connection with the joint ownership of Summer, costs related to pensions attributable to Santee Cooper as of both December 31, 2021 and 2020 totaled $14 million and $19 million and were recorded within deferred debits. Costs related to other postretirement benefits attributable to Santee Cooper as of December 31, 2021 and 2020 totaled $12 million both years, and was recorded within deferred debits.

Changes in Fair Value of Plan Assets

Pension Benefits
(millions)	2021			2020
Fair value of plan assets, January 1	$	747		$	725
Actual return (loss) on plan assets		62			84
Benefits paid		(41	)		(22	)
Settlements		—			(40	)
Fair value of plan assets, December 31	$	768		$	747

Investment Policies and Strategies

Strategic investment policies are established for DESC’s prefunded benefit plans based upon periodic asset/liability studies. Factors considered in setting the investment policy include employee demographics, liability growth rates, future discount rates, the funded status of the plans and the expected long-term rate of return on plan assets. Deviations from the plans’ strategic allocation are a function of DESC’s assessments regarding short-term risk and reward opportunities in the capital markets and/or short-term market movements which result in the plans’ actual asset allocations varying from the strategic target asset allocations. Through periodic rebalancing, actual allocations are brought back in line with the target. Future asset/liability studies will focus on strategies to further reduce pension and other postretirement plan risk, while still achieving attractive levels of returns. Financial derivatives may be used to obtain or manage market exposures and to hedge assets and liabilities.

DESC’s overall objective for investing its pension plan assets is to achieve appropriate long-term rates of return commensurate with prudent levels of risk. To minimize risk, funds are diversified among asset classes, securities, active and passive investment strategies and investment advisors. The strategic target asset allocations for DESC’s pension fund is: 45% global equities, 53% fixed income and 2% cash. Global equities include investments in U.S. and non-U.S. companies, developed and emerging markets and small and large cap companies. The split between U.S. and non-U.S. companies is roughly 60% U.S./40% Non-U.S. Fixed income includes corporate debt instruments of companies from diversified industries and U.S. Treasuries. Equity and fixed income investments are in individual securities as well as mutual funds.  

DESC also utilizes common/collective trust funds as an investment vehicle for its defined benefit plans. A common/collective trust fund is a pooled fund operated by a bank or trust company for investment of the assets of various organizations and individuals in a well-diversified portfolio. Common/collective trust funds are funds of grouped assets that follow various investment strategies.

For 2022, the expected long-term rate of return on assets will be 7.00%. DESC determines the expected long-term rates of return on plan assets for its pension plans by using a combination of:

• Expected inflation and risk-free interest rate assumptions;

• Historical return analysis to determine long term historic returns as well as historic risk premiums for various asset classes;

• Expected future risk premiums, asset classes’ volatilities and correlations;

• Forward-looking return expectations derived from the yield on long-term bonds and the expected long-term returns of major capital market assumptions; and

• Investment allocation of plan assets.

Fair Value Measurements

Assets held by the pension plan are measured at fair value and are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. At December 31, 2021 and 2020, fair value measurements, and the level within the fair value hierarchy in which the measurements fall, were as follows:

At December 31,	2021								2020
(millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	—	$	1	$	—	$	1	$	10	$	—	$	—	$	10
Corporate debt instruments		—		332		—		332		—		315		—		315
Government and other debt instruments		—		67		—		67		—		35		—		35
Total recorded at fair value	$	—	$	400	$	—	$	400	$	10	$	350	$	—	$	360
Assets recorded at NAV(1)
Common/collective trust funds								387								387
Total recorded at NAV							$	387							$	387
Total investments(2)							$	787							$	747

(1) These investments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient are not required to be categorized in the fair value hierarchy.

(2) Excludes net assets related to pending sales of securities of $4 million, net accrued income of $2 million, and includes net assets related to pending purchases of securities of $25 million at December 31, 2021.

For purposes of calculating NAV, portfolio securities and other assets for which market quotes are readily available are valued at market value. Short-term investment vehicles are funds that invest in short-term fixed income instruments and are valued using observable prices of the underlying fund assets based on trade data for identical or similar securities. U.S. Treasury securities are valued using quoted market prices or based on models using observable inputs from market sources such as external prices or spreads or benchmarked thereto. Corporate debt instruments and government and other debt instruments are valued based on recently executed transactions, using quoted market prices, or based on models using observable inputs from market sources such as external prices or spreads or benchmarked thereto. In addition, corporate debt instruments include investments in open-end mutual funds registered with the SEC that invest in corporate debt instruments. Common collective trust assets and limited partnerships are valued at NAV, which has been determined based on the unit values of the trust funds. Unit values are determined by the organization sponsoring such trust funds by dividing the trust funds’ net assets at fair value by the units outstanding at each valuation date. Joint venture interests are invested in a hedge fund of funds partnership that invests directly in multiple hedge fund strategies that are not traded on exchanges

and not traded on a daily basis. The valuation of such multi-strategy hedge fund of funds is estimated based on the NAV of the underlying hedge fund strategies using consistent valuation guidelines that account for variations that may influence their fair value.

Expected Cash Flows

Total benefits expected to be paid from the pension plan or company assets for the other postretirement benefits plan (net of participant contributions), respectively, are as follows:

Expected Benefit Payments

(millions)	Pension Benefits		Other Postretirement Benefits
2022	$	46	$	11
2023		44		11
2024		46		11
2025		45		11
2026		43		11
2027 - 2031		201		57

Pension Plan Contributions

Under its funding policies, DESC evaluates plan funding requirements annually, usually in the fourth quarter after receiving updated plan information from its actuary. Based on the funded status of each plan and other factors, DESC determines the amount of contributions for the current year, if any, at that time. DESC made no contributions to the pension trust in 2021, 2020 or 2019. DESC does not expect to contribute to its qualified pension plan in 2022.

Net Periodic Benefit Cost

Net periodic benefit cost is recorded utilizing beginning of the year assumptions. Disclosures required for these plans are set forth in the following tables.

Components of Net Periodic Benefit Cost

	Pension Benefits									Other Postretirement Benefits
Year Ended December 31,	2021			2020			2019			2021		2020		2019
(millions)
Service cost	$	9		$	12		$	15		$	1	$	3	$	3
Interest cost		20			24			28			6		8		9
Expected return on assets		(48	)		(45	)		(40	)		—		—		—
Prior service cost amortization		—			—			—			—		—		—
Amortization of actuarial losses		6			6			11			—		—		—
Settlement loss		—			7			16			—		—		—
Curtailment		—			—			6			—		—		3
Net periodic benefit cost	$	(13	)	$	4		$	36		$	7	$	11	$	15

In connection with regulatory orders, DESC recovers current pension costs through a rate rider that may be adjusted annually for retail electric operations or through cost of service rates for gas operations. For retail electric operations, current pension expense is recognized based on amounts collected through a rate rider, and differences between actual pension expense and amounts recognized pursuant to the rider are deferred as a regulatory asset (for under-collections) or regulatory liability (for over-collections) as applicable. In addition, DESC amortizes certain previously deferred pension costs. See Note 3.

Other changes in plan assets and benefit obligations recognized in other comprehensive income (net of tax) were as follows:

	Pension Benefits								Other Postretirement Benefits
Year Ended December 31,	2021			2020		2019			2021		2020			2019
(millions)
Current year actuarial (gain) loss	$	(3	)	$	2	$	(1	)	$	—	$	(2	)	$	1
Total recognized in other comprehensive income	$	(3	)	$	2	$	(1	)	$	—	$	(2	)	$	1

Other changes in plan assets and benefit obligations recognized in regulatory assets were as follows:

	Pension Benefits									Other Postretirement Benefits
Year Ended December 31,	2021			2020			2019			2021			2020			2019
(millions)
Current year actuarial (gain) loss	$	(39	)	$	1		$	(51	)	$	(6	)	$	(27	)	$	20
Amortization of actuarial losses		(5	)		(6	)		(11	)		—			(1	)		—
Settlement loss		—			(6	)		(16	)		—			—			—
Total recognized in regulatory assets	$	(44	)	$	(11	)	$	(78	)	$	(6	)	$	(28	)	$	20

Significant assumptions used in determining net periodic benefit cost:

	Pension Benefits			Other Postretirement Benefits
Year Ended December 31,	2021	2020	2019	2021	2020	2019
Discount rate	2.73%	3.47%	3.57/4.38%	2.80%	2.80%	4.08/4.41%
Expected return on plan assets	7.00%	7.00%	7.00%	n/a	n/a	n/a
Rate of compensation increase	4.52%	3.00%	3.00%	n/a	n/a	n/a
Crediting interest rate for cash balance plans	1.93%	2.67%	2.77/3.58%	n/a	n/a	n/a
Health care cost trend rate				6.25%	6.25%	6.60%
Ultimate health care cost trend rate				5.00%	5.00%	5.00%
Year achieved				2025-2026	2025-2026	2023

Participation in Dominion Energy Defined Benefit Plans

As discussed above, effective January 2021, DESC employees who had been receiving a cash balance formula became covered by the Dominion Energy Pension Plan. In addition, DESC employees hired in 2021 prior to July 2021 are covered by the Dominion Energy Pension Plan. As a participating employer, DESC is subject to Dominion Energy’s funding policy, which is to contribute annually an amount that is in accordance with ERISA. DESC made no contributions to the Dominion Energy Pension Plan during 2021. While DESC has not been notified by Dominion Energy of any required contributions to be made in 2022, it anticipates that it may have to contribute less than $1 million as a result of a contribution made by Dominion Energy in December 2021. DESC’s net periodic pension cost related to this plan was $3 million in 2021. Net periodic benefit (credit) cost is reflected in other operations and maintenance expense in DESC’s Consolidated Statements of Income. The funded status of various Dominion Energy subsidiary groups and employee compensation are the basis for determining the share of total pension costs for participating Dominion Energy subsidiaries. At December 31, 2021, DESC’s pension and other postretirement benefits obligation includes $3 million for amounts due to Dominion Energy related to this plan.

Dominion Energy holds investments in trusts to fund employee benefit payments for the pension plan in which DESC’s employees participate. Any investment-related declines in these trusts will result in future increases in the net periodic cost recognized for such employee benefit plans and will be included in the determination of the amount of cash that DESC will provide to Dominion Energy for its share of employee benefit plan contributions.

401(k) Retirement Savings Plan

Effective January 2021, DESC participates in a defined contribution savings plan sponsored by Dominion Energy.  Previously, DESC had participated in a defined contribution plan sponsored by SCANA, which was merged into the Dominion Energy plan in December 2020. DESC recognized employer matching contributions of $11 million in 2021 and $14 million in both 2020 and 2019.